photo by: Mike Yoder

Lawrence City Hall, 6 E. Sixth St., is pictured Thursday, July 7, 2016.

As the City of Lawrence attempts to address a multimillion-dollar budget imbalance, the city manager’s recommended budget for 2023 includes both revenue increases — via new fees and increases in utility rates — and budget cuts.

City Manager Craig Owens’ recommended budget for 2023 totals about $436.8 million across all funds and keeps the city’s property tax rate flat at 33.290 mills. It also proposes new parks and recreation fees, utility rate increases, and $936,000 in cuts to city services and positions, some of which are offset by other additions. The city is proposing $1.2 million in new parks and rec fees — potentially including new admission fees for recreation centers, which are currently free to access — and the closure of the Prairie Park Nature Center. Proposed budget additions include increased funding for economic development, information technology and two new positions.

The budget cuts and the proposed fee and rate increases come at a time when the city is collecting more in property taxes due largely to rising home values. However, Owens said the budget works toward the commission’s goal of closing an approximately $9 million “structural” budget deficit. He said he thought the community wouldn’t be comfortable with making further service cuts or proposing further fee increases — in addition to the closure of the nature center and new parks and rec fees — in order to cut taxes.

“Those two things are going to impact the community and will be noticeable in the community,” Owens said. “And we thought going yet deeper to fully address the structural deficit and then going even beyond that to reduce the property tax levy would have created yet more, I think, discomfort in the way the community is going to be adjusting to our service levels.”

The budget assumes a 12% increase in property valuations, which the city anticipates will generate approximately $4.7 million in new taxes. The budget also assumes an approximately 5% increase in sales tax collections, some of which is related to inflation costs the city must also account for, amounting to a $2.55 million increase in sales tax collections.

The city’s 2022 budget was “structurally imbalanced,” including millions more in spending — to fund several new positions, staff raises and other initiatives –than the city was projected to collect in normal revenues. The city planned to offset the gap over a two-year period using $19.3 million in federal pandemic relief funding from the American Rescue Plan Act (ARPA), but city leaders said increases in revenue, service cuts or both could be needed to get the city’s spending and revenues back in line. Because of growing revenues, the gap is significantly smaller than initially projected, and the budget sets aside $9.1 million in ARPA funds for projects.

Owens said the budget seeks to address several ongoing priorities, including catching up on deferred maintenance to streets, sewers, waterlines and other city infrastructure; addressing homelessness and housing stability; and allocating another $4.2 million for increases to employee pay. Lawrence city commissioners previously indicated they wanted to keep the city’s property tax rate flat, and Vice Mayor Lisa Larsen said she was interested in potentially lowering the tax rate to help offset the additional tax money that residents have been paying due to rising property values.

Ultimately, Owens said there are hundreds of ways to arrange the city’s budget, and that input from the community and the decisions of the City Commission will shape what is approved.

“This is a starting point for the conversation, and there are some tough decisions that are reflected in this proposal,” Owens said. “I take no real pride in authorship; I’m more excited about how do we make adjustments to the process from now on to get to the right place.”

Policy questions laid out for commissioners to consider include whether they want to keep the property tax rate flat and whether there are any changes they want to make to the operating budget or the proposed Capital Improvement Plan ahead of the public hearing for the budget on Aug. 23.

More details about various aspects of the recommended budget are as follows:

The structural imbalance: The city previously projected a $21 million “structural imbalance” in its general fund budget over a two-year period, which it planned to help offset with the $19.3 million in ARPA funds. Because of increases in property and sales tax revenues, that figure has now been revised to an approximately $9.14 million gap over two years. So far, the city has allocated about $9.26 million — $3 million in 2021 and a projected $6.26 million in 2022 — of ARPA funds to support the city’s general fund. The 2023 budget does not quite eliminate the gap, and calls for using $878,000 of ARPA funds to offset general fund expenses, allowing $9.1 million in remaining ARPA funds to be earmarked for city projects.

New parks and rec and other fees: The budget proposes closing the budget gap in part with $1.45 million in new fees. The vast majority of those fees would consist of $1.2 million in proposed parks and rec fees. Finance Director Jeremy Willmoth said the details of those fees would be determined later, but that everything was on the table, including increases to pool entrance fees, cemetery fees, facility rental fees, class and program fees, sponsorships, and the implementation of fees to use city recreation centers. Some fee revenue would go to increase funding for parks and rec scholarships for low-income residents.

In addition to the parks and rec fees, the budget includes $250,000 in new fees for “false alarms” for fire and medical response. Fire and medical personnel responded to 1,500 false alarms in 2021, and Owens said those were almost all due to electronic alarm systems that automatically alerted first responders. He said while details would be determined later, he anticipated a grace period before fees were assessed, and the point of the fee would be for property owners to address technological issues causing the false alarms.

Prairie Park Nature Center closure and other reductions: The budget calls for $936,000 in reductions, the biggest of which is the closure of the nature center. Closing the center, which opened in 1999, is expected to save the city $337,000. The budget states the center’s staff, which includes two full-time employees and 12 part-time employees, would be transferred elsewhere in the city and a plan would be developed to safely rehome the animals currently living at the center.

The budget states the center scored low under a new process that evaluates programs in relation to the goals in the city’s strategic plan. Many of the city’s parks and rec programs and facilities are either completely or partially subsidized by the city, meaning residents pay no fees or only a small fee, and Willmoth said the level of subsidy required for the center was also a consideration. He said the nature center is subsidized at a rate of about 85%, and that for comparison, the public pools are subsidized at about 55% and the city golf course is subsidized at 15%.

Owens states in his budget letter to the commission that the city could explore opportunities to repurpose and lease the building, adding that it is at a prime location for an early childhood education or child care center. He notes that early childhood education is an unmet community need identified in the city’s economic development strategic plan.

The other budget cuts include a $100,000 reduction to contracted animal control services, $68,000 to eliminate a vacant recreation programmer position, $66,000 to eliminate a vacant legal analyst position, and $65,000 to convert some landscape plantings to native grasses. The budget also proposes moving the city’s alley rehabilitation program to the solid waste fund. The solid waste fund is funded through commercial and residential trash collection fees. When asked if there would be a correlating increase in trash collection fees due to the change, Owens said the city anticipates the current rate models — which in recent years have called for regular rate increases — could cover the change.

Utility and trash rates: The city has separate rates for water/sewer, storm water and trash and recycling collection services. The city’s three utility funds are enterprise funds, meaning the rates charged to residents are set to cover the personnel, infrastructure maintenance and other costs of operating the utility or collection service. Though exact rates are not proposed as part of the budget, the budget plans for an average 8% increase across all the rates. Willmoth said exactly what the increase would be depends in part on how much money the commission decides to allocate toward additional employee pay and water, sewer and storm water projects. He said a specific rate increase would be proposed in the fall after the budget had been adopted.

Reallocated spending: As a result of the proposed reductions, the budget calls for “reprioritizing” $606,000 in spending to other areas. That includes a 20% increase, equal to $143,000, to economic development. Willmoth said the additional funds would be distributed among the city’s economic development partners, which include the Chamber of Commerce, the Economic Development Corporation, Peaslee Tech, the University of Kansas Small Business Development Center and KU Innovation Park. Owens said investing in economic development is important for attracting new businesses to the community, which will also help balance the tax burden between residential and commercial property owners. Other new spending includes $340,000 toward IT infrastructure and disaster recovery; $150,000 toward a new cybersecurity system; and $123,000 to add an accountant position.

Capital Improvement Plan: The recommended CIP for 2023 to 2027 includes $408.2 million of spending on infrastructure and capital projects over the next five years, and prioritizes maintaining existing infrastructure before adding new assets. The proposed plan for 2023, which is adopted as part of the budget process, totals $109.35 million. The commission previously discussed and provided input on the strategy for the CIP, and commissioners will discuss adding or removing projects for 2023 as part of the budget process.

Increase to Lawrence Public Library property tax rate: The library board recently voted to approve a property tax rate increase of 0.077 mills to help fund employee raises. The city is essentially decreasing its property tax rate by that amount, which is expected to generate about $99,000 in property taxes in 2023, so that the library increase does not affect the overall city mill levy rate.

The Lawrence City Commission will receive the recommended budget as part of a study session at 5:45 p.m. Tuesday at City Hall, 6 E. Sixth St.